How Furloughs Will Affect Pay and Benefits

Well, the deadline is here at last: Sequestration lands in less than two days. Despite all the rhetoric from both sides of the aisle, there are few serious efforts under way to head it off by Friday.

There’s also a dearth of specific information on possible furloughs and how they would affect federal employees’ pay and benefits. Agencies now are starting to send out general notices to employees on the likelihood of furloughs during the rest of the fiscal year. Actual furloughs in some agencies could start as early as March or April, if Congress opts not to reverse the automatic spending cuts or otherwise modify the sequester timetable. Congress also needs to keep the government open past March 27, so it’s likely they will try to incorporate some solution on the sequester into extending the continuing resolution.

But who knows?

Let’s assume the sequester stays in place and there are furloughs. Federal employees and managers should look closely at the Office of Personnel Management’s furlough guidance here as well as the agency’s supplemental information on the topic.

It’s important to remember that agencies are supposed to turn to furloughs only as a last resort, and that some agencies already have said they will not have to furlough workers to meet the spending cuts mandated by sequestration.

Here are some highlights from OPM’s guidance on how furloughs affect certain pay and benefits:

• Outside Employment: Employees can take another job while on furlough to help make ends meet, but they need to vet it with their agency to make sure it’s not a conflict of interest or otherwise prohibited. The same standards of executive branch-wide ethical conduct (5 CFR, part 2635) apply to employees during furloughs as they do under regular operations. OPM urges feds to review the rules and consult their agency ethics official to make sure all i’s are dotted and t’s crossed.
• Unemployment Compensation: Some federal employees could be eligible for unemployment insurance while they are on furlough. It depends on the laws of the state where they work. For information, read this guidance from the Labor Department and click here for links to individual state offices.
• Severance Pay: Furloughed employees are not entitled to severance pay because they are not being separated from federal service. A furlough is when an employee is placed in temporary nonduty, nonpay status because of lack of work or funds, or other nondisciplinary reasons.
• Health Care: Feds’ health benefits will be protected during a furlough. Agencies and employees will continue to pay their respective shares of the health premiums. “If an employee’s paycheck is insufficient to cover his/her share, the enrollee share will accumulate and will then be withheld from pay upon return to pay status,” the OPM guidance states.
• Buyouts/Early Outs: Agencies that have approval to offer early retirement and/or buyouts can offer those options to eligible furloughed employees. Agencies also could decide to offer early outs or buyouts in lieu of a furlough. “The agency would decide which option to take based on its situation, e.g., the need to permanently reduce or restructure its workforce or to save funds by furloughing employees.”
• Paycheck Deductions: The government has a priority list of deductions for payroll providers if an employee’s gross pay is not enough to cover all the typical paycheck deductions, which could very well happen during a furlough. The top three on that list are deductions for retirement, Social Security and Medicare. Click here for a complete list and OPM’s policy guidance on the issue. Again, that order of preference only applies when a fed’s gross pay is insufficient to permit all the usual deductions.

Sen. Barbara Mikulski, D-Md., said she thinks lawmakers need to sacrifice their own pay if federal employees are forced to take unpaid leave as a result of sequestration. “If the federal employees are going to take a 20 percent cut and be furloughed, we should take a 20 percent cut,” Mikulski said Tuesday on the Senate floor. “If they take a hit, we should take a hit, and I look forward to moving on that legislation,” said the new chairman of the Appropriations Committee. Many federal employees live and work in Maryland, so Mikulski’s staunch defense of feds and opposition to sequestration comes as no surprise.

The Defense Department has estimated that civilian feds who are furloughed could lose up to 20 percent in pay as a result of the unpaid time off. Deputy Defense Secretary Ashton Carter has said he would give up 20 percent of his pay in solidarity with furloughed employees. Political appointees and lawmakers are not subject to furlough.